Nationalization impact in Syria, Graduation Paper- Iyad Arar

1.
Student. Iyad Arar
Prof. Jack Turner
NATIONALIZATION IMPACT IN SYRIA
I. INTRODUCTION
Historically, nationalization has usually taken place for ideological or political reasons.1
After World War II socialist governments came to power in several countries and set about
nationalizing heavy industry, especially coal.2
The goal was not to increase efficiency but to put
the union leaders -who had a loud voice in socialist parties- in a position to dictate terms for the
benefit of the workers, rather than the nation as a whole.3
For more than a quarter of a century, Syria has been ruled by the Arab Socialist Ba’ath party,
which claims to be leading the country not only to unity and freedom but also to socialism.4
Between 1958 and 1965, Syria has experienced an almost complete reversal of development
policy.5
The government assumed a greater role in economic planning, and by 1965 had
nationalized most of the larger manufacturing concerns.6
Nationalization” typically refers to a
government takeover of privately owned businesses.7
In 1964 the Syrian president had enacted a decree8
which referred to it as the number 56,
which resulted the nationalization of the Arabic United Company for Industry9
. This resulted that
the owner of this company lost the power to control it. Then in 1986 a law was established under
the number 14 which included the properties of land that was owned by the owner of the Arabic
United Company for industries as part of the nationalized property under the decree number
1
CATHERINE RAMPELL, New York Times.
2
History of nationalization,< http://www.conservapedia.com/
3
Id.
4
Volker Perthnes, “A look at Syria’s upper class”, the bourgeoisie and the Ba’th, Middle East report, May – June
1991.
5
Id.
6
Syrian Economic Study<http://www.country-data.com/
7
New York Times, CATHERINE RAMPELL
8
Presidential Decree, is the law that is published by the president in regards to his legislations powers.
9
Arabic United company for Industries, (AUCI), is a family company that used to be owned by KABBANI family

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56/1964. These Nationalization statutes interfered with the rights of a private party to control
their own properties, this right shall be reserved under the Syrian constitution. Also these
Nationalization statutes caused harm to the private party when a just compensation was not paid
till present. In light of this harm and interference that these statutes caused to the private party,
these statutes shall be voided and the ownership of the nationalized properties shall be back to
their rightful owners. This paper will propose both the presidential decree number 56/1964 and
the law number14/1986 -which was a complementary law for a presidential decree number
56/1964- are unconstitutional under section 15 of the Constitution of Syria 201210
and they shall
be voided.
Section II of the paper will provide a quick summary about the nationalization in Syria and it
will explain the situations where the government can make such decision under the Syrian
constitution which was issued on 2012. Section III of the paper will demonstrate the
nationalization was ineffective. Section IV of the paper will explain the unconstitutionality of the
nationalization decrees will save government resources. Section V of the paper will argue that
the presidential decree 56/1964 and the law 14/1986 violate the current constitution of Syria.
Section VI will conclude by the mentioned arguments that the presidential decree 56/1964 and
the law 14/1986 are unconstitutional under the new constitution of Syria 2012 and they shall be
voided.
II. BACKGROUND
“The events in the 1950s and 1960s of Syrian history are key to understanding what kind of
regime was established by the Ba’ath party coming to power,”11
Which resulted the
10
Syrian Constitution 2012, a new constitution was established under Assad Era when the parliament passed it 2012, it removed
the old constitution that governed Syria since 1980.
11
Fred Weston, What the Assad regime was and what it has become<http://www.marxist.com/,08 March 2013

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implementing of the socialism ideology. “After the Second World War French imperialism was
pushed out Syria, but the country remained under the domination of imperialism.”12
However,
during the union between Syria and Egypt 1958-1961, “The measures adopted that time included
land redistribution, social welfare for workers and the poor, and a push to industrialize the
country.”13
These policies were adopted measures against imperialism and also against the
local capitalists and landlords.
The union between Syria and Egypt did not last more than 3 years. At that time, “the impact
of the Soviet Union and China also played a key role. Economic growth in both countries was
still very strong.”14
In this context, in 1963 a section of the military officer caste carried out a
coup.15
The 1963 coup brought to power a radical wing of the officer caste, in the form of the
Ba’ath, to power.16
“It set in motion a process that was to lead the nationalization of more and
more sections of the economy, including measures of land redistribution and the nationalization
of the private banks, eventually setting up a system modelled on that of the Soviet Union.”17
Between 1958, after the union with Egypt, and 1965, a series of laws were enacted that
resulted in progressive socialization of the economy.18
In 1963 agrarian reform stripped large
landowners of their estates and much of their political power, provided some land to landless
farmers, and improved conditions for farm tenants and sharecroppers. In 1963 commercial
banking and insurance were completely nationalized, and in 1965 most large businesses were
nationalized wholly or partially.19
12
Id.
13
Id.
14
Economy of Syria, Role of the Government in the Economy,< http://countrystudies.us/syria/42.htm
15
Id.
16
Id.
17
Id.
18
Thomas Collelo, Washington: GPO for the Library of Congress, Case study, Syria, Role of the Government in the
Economy<http://countrystudies.us/, 1987
19
Id.

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In 1964 the president of Syria issued a decree number 56/1964, It gave the authority the
power to take over the Arabic United Corporation for Industry for an estimated compensation,
which will be paid no more than 10 years from the date of publishing this decree.20
One of the owners of the corporation was also an owner of a land near the nationalized
company. However, the government represented by the prime minster, occupied this land
without any legal concept. When the owner demanded his power on the land, and after he filed a
law suit, the law number 14/1986 was established which included this land with the nationalized
properties of the Arabic United Corporation for Industry by the decree 56/1964.21
On 2012 a new constitution was establishes for Syria, it was described by its’ writers that this
constitution will be a modern one, which will preserve the rights of all citizens. This constitution
has quoted in section 15 a rule which was presented in the previous constitutions that Syria had.
This rule specified that the Private property owned by individual or a
group of people shall be protected as follow:
i. Private property can be removed only for public use and that shall
be done only by a decree in exchange of a fair compensation in
accordance with the law. The compensation should be equal to the
real value of the property.
ii. Expropriation of private properties can only be established by a
court decision.22
The law number 14/1986 violated the constitution when its’ purpose was to nationalize a private
property. The nationalization can be only by a decree. However, when the decree was not
performed yet, it exceeded the limits for the compensation, an essential duty by the government
20
Presidential decree, Syrian Law, 56, 1964
21
Lawyers Magazine, law number 14, 1986
22
Syrian constitution, section 15

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was not performed. As a result, the validity of this decree should be affected because the breach
from the government.
The new Syrian constitution has established the terms of reference that constitutional court
shall deal with.23
The code of the Constitutional Supreme Court mentioned, the law that is being
claimed unconstitutional can be seen by The Constitutional Supreme Court only if it is
meritorious claims. 24
III. NATIONALIZATION WAS INAFFECTIVE
Much confusion exists on the left25
as to the real nature of the Syrian regime because of what
it was in the past.26
In the 1960s after a Ba’athist coup, the economy was transformed, adopting
the model of the Stalinist USSR.27
Although progressive in terms of the measures carried out, it
was never a regime based on workers’ democracy. Power was in the hands of a bureaucratic
elite, and in this lay the danger of a reversal of the progressive measures and a return to capitalist
relations.28
A. The Nationalization Was Bad For The Economic Policy
The nationalization was to favor the authority in Syria, not for the improvement of the
domestic economic. Nationalization in general failed to support the labor rights. The “Ideological
Report” of the Syrian Ba’ath Party’s 6th Congress in October 1963 states that the aim of the
party was “to build a socialist society”29
. In 1963 commercial banking and insurance were
23
Syrian Constitution, section 147.
24
Syrian constitutional supreme court code 2014
25
Left refer to Political positions or activities that accept or support social equality.
26
Farshad Azadian and Basel Sulaiman, In Defence of the Syrian Revolution: The Marxist position on the revolution and Assad’s
so-called “anti-imperialism”,< http://www.marxist.com/, Friday, 16 March 2012.
27
Id.
28
Id.
29
A look at Syria’s upper class, the bourgeoisie and the Ba’th, Middle East report, May-June 1991

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completely nationalized, and in 1965 most large businesses were nationalized wholly or
partially.30
The new regime was what Marxists would define as a deformed workers’ state, i.e. a
state where the economy is state owned and planned, but power is in the hands of a bureaucratic
elite standing above the workers.31
Even in the bourgeois media this is often referred to as the
“socialist” period; the economy is referred to as “socialist”. It was of course not genuine
socialism, as there was no workers' democracy. It was a terribly deformed caricature of genuine
socialism.32
The nationalized property were to be brought under state control. What this meant was that
no independent workers’ organizations were to be allowed, again copying the Soviet Union.33
Nationalization is anti-worker. In a free economy employers compete for the services of
workers. Workers therefore are able to improve their working conditions and incomes.34
Even if
nationalization is intended to be confined to a certain sector of the economy, this cannot be of
comfort to the workers in the targeted sectors.35
Freedom House, in its 2010 report, reveals that
workers’ rights are most repressed in communist-oriented countries. Increased government
domination brings with it a tendency towards authoritarian rule.36
Wage increases are totally
dependent on increased investment, the efficiency of the operations of firms, and higher
economic growth, so nationalization can do nothing other than prove to be anti-worker and
reduce wages.37
30
Thomas Collelo, Washington: GPO for the Library of Congress, Case study, Syria, Role of the Government in the
Economy<http://countrystudies.us/, 1987
31
Fred Weston, What the Assad regime was and what it has become<http://www.marxist.com/,08 March 2013
32
Id.
33
Id.
34
Nationalization is bad for consumers, workers, the poor and democracy, http://www.moneyweb.co.za/, 2010
35
Id.
36
Freedom in the World, < https://freedomhouse.org/, 2014.
37
Nationalization is bad for consumers, http://www.moneyweb.co.za/, 2010

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7
Nationalization is anti-consumer. Government-appointed managers cannot consider the
wishes of consumers.38
Government-appointed managers, compelled to follow the dictates of
their political bosses, cannot consider the wishes of consumers. What results is lack of choice,
quality, convenience, and alternatives. Shortages arise in the items that are most in demand, and
service levels deteriorate.39
Hedrick Smith, in his book The Russians (1975), wrote about the long queues in shops.
“The accepted norm,” he said, is that the Soviet woman daily
spends two hours in line, seven days a week, daily going through
double the gauntlet that the American housewife undergoes at her
supermarket once, maybe twice a week. I noted in the Soviet press
that Russians spend 30 billion man-hours in line annually to make
purchases. Shopping in socialist Russia was starkly different to
shopping in America because of the differences in the structure of
their economies. In free enterprise America, consumers are
sovereign and people in private firms are prepared to risk capital
and take part in vigorous competition to serve them. In socialist
Russia, it was the politicians and government officials who were
sovereign, as in all socialist economies which are unavoidably
authoritarian.40
The lack of workers’ democracy, of workers’ control and management of industry, meant
that what had come into being in Syria was a system like that in the Soviet Union,41
a totalitarian
one party dictatorship, with power concentrated in the hands of a privileged bureaucracy resting
on a state owned economy. This was not “socialism”.42
38
Id.
39
Id.
40
Hedrick Smith, The Russians (1975)
41
Fred Weston, What the Assad regime was and what it has become<http://www.marxist.com/,08 March 2013
42
Id.

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8
B. The Nationalization Effort Aimed At Liquidating The Enemy Of The
Socialism, The Syrian Bourgeoisie
In Syria today an active private sector controls more than 90% of the economic. The roots of
Syria’s old bourgeoisie can be traced back to the “landowning bureaucratic class”43
of the late
Ottman period, 44
those influential families of local notables and Turkish officials that owned
estates and were active in commerce. With the end of Ottman rule, these families remained the
leading class.45
The land reform law of the United Arab Republic (uniting Syria and Egypt)
struck the first blow against the old bourgeoisie.46
When the Ba’ath took power in a 1963 coup,
the new rulers nationalized the economic sections in Syria which seriously diminished the
economic power of the bourgeoisie class.47
In 1970s Hafiz Al-Asad, the president of Syria that time, announced the open door policy,
new groups caught up with and surpassed the old bourgeoisie in wealth and influence. They
seized this opportunity. Most similar to the old bourgeoisie, the new industrial bourgeoisie
entrepreneurs started to be formed.48
Whereas 25 years of bureaucratic rule in Syria began with the liquidation of major part of the
industrial bourgeoisie and left its commercial counterpart less untouched. Today it can be seen
the beginning of the bureaucracy’s transformation process, the “new class” and the state
bourgeoisie.49
43
Philip S. Khoury, Urban Notables and Arab Nationalism: The Politics of Damascus, 1860-1920 (Cambridge: Cambridge
University Press, 1983). P.3
44
A look at Syria’s upper class, the bourgeoisie and the Ba’th, Middle East report, May-June 1991.
45
Id.
46
Id.
47
Id.
48
Id.
49
Id.

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IV. SAVING GOVERNMENT RESOURCES
The job of government was to raise revenue as cheaply and efficiently as possible to perform
the limited tasks that it could do better than the private sector. 50
As the 20th century began, the
distribution function acquired increased significance. Social welfare benefits became important,
and many countries introduced graduated tax systems.51
In the later interwar period, and more
especially in the 1950s and ’60s, stabilization was central, although equity was also a major
concern in the design of tax systems. In the 1970s and ’80s, however, the pendulum swung52
back. Once more, allocative issues came to the fore, and stabilization and distribution became
less significant in government finance.53
A. The Government Will Save Its’ Financial Funds
If government spends money in a productive way that generates a sufficiently high rate of
return, the economy will benefit, but this is the exception rather than the rule.54
Government will reduce financial spending. Every factory needs a minimum amount of
money for taking care of the facility and for keeping its productivity. In the world of
manufacturing it is important that management not only control its overhead but also understand
how it is assigned to products and ultimately reported on the company's financial statements.55
The Manufacturing overhead which the government will not have to pay it if the
nationalization statutes were voided, refers to indirect factory-related costs that are incurred
when a product is manufactured. It includes such things as the electricity used to operate the
50
Assar Lindbeck, Government economic policy,< http://www.britannica.com/
51
Id.
52
Pendulum swung means that every time a country, a person, a political party or whatever, takes an extreme position, it
eventually swings back. And this has proven to be true time and again.
53
Assar Lindbeck, Government economic policy,< http://www.britannica.com/
54
Daniel J. Mitchell, McKenna Senior Fellow in Political Economy
55
Introduction to Manufacturing Overhead,< http://www.accountingcoach.com/

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factory equipment, depreciation on the factory equipment and building, factory supplies and
factory personnel.56
The other type of expenses refer to the nonmanufacturing costs, represent a manufacturer's
expenses that occur apart from the actual manufacturing function. It includes Selling, General
and Administrative expenses, and Interest Expense.57
While the government took control on the nationalized factory, it was responsible for paying
the needed expenses for the factory continuance. However, the government will save these
money when it returns the factory to its owners.
On the other hand, Government will not pay the just compensation. When the nationalization
statues were established, it has created an obligation on the government, which the government
shall pay a just compensation for the nationalized properties.58
While the just compensation was
not paid yet, and the issue is still being seen in front of Syrian courts.59
The government can
avoid this payment by granting the past owners of the nationalized property the right to re-
control their properties. By doing this act, there will be no legal basis for the government to pay
the just compensation, and the government will save its’ funds.
B. The Government Will Earn More Revenues
In a broad sense, revenue, for government, is all the money received.60
Tax revenue is the
most obvious. Government sets a tax policy, people pay their taxes, and government has
56
Id.
57
Id.
58
Presidential decree number 56, Syrian statutes, 1964
59
Kabbani, 3632, Syrian supreme court, 2011
60
Where Does Government Get Its Money From?, https://fwcon.wordpress.com/

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money.61
However, why do economies grow? When people have profits, there is only so many
things they can do with the extra money, they invest. 62
1. The Owners Of The Nationalized Factory Will Have To Pay Tax
Taxes are an essential source of revenues for all levels of government.63
While the taxes are
related to the income that the person or a facility makes,64
the government has fewer measures of
progress or success than the private sector. Spending on a program is not equivalent to progress.
The private sector has profit as a clear-cut measure.65
In most outstanding private sector
organizations there are clear, well-understood, job-by-job, top-to-bottom goals and objectives.66
In government, goals and objectives have been ill-formed, fuzzy and soft. Goals in the
government are often divergent which may lead to confusion.67
The average years of experience
either on the substantive matters for which they are responsible or in management generally for
political leadership is much, much less than their counterparts in the private sector.68
The private
sector can manage to make a better income and more success that the government sector which
will reflect in reducing the tax amount and which will increase the government income.
2. Encourage The Investments
Government should concentrate on providing the best possible environment for the
achievement of high economic growth.69
Nationalization destabilizes a society and economy,
reduces investment, entrepreneurial innovation and economic growth, and has negative
consequences for the majority of the population, including the poor. It sends a message to
61
Id.
62
Id.
63
Tax law, 24,, Syrian statutes, 2003
64
Id.
65
Jan Mares, 25 Differences Between Private Sector and Government Managers,< http://www.powermag.com/, 2013
66
Id.
67
Id.
68
Id.
69
Nationalization is bad for consumers, http://www.moneyweb.co.za/, 2010

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inhabitants and outside investors that private property is not safe. Nationalization destroys jobs
and the profitability of enterprises and is a crime against the general populace. It is bad for
consumers, workers, the poor and democracy.70
After the nationalization in Syria, many of the
owners of the nationalized facilities left Syria and headed for Lebanon, Jordan and Saudi Arabia,
transferring assets in advance and taking with them what they could in cash and expertise.71
Nationalization in Syria hit the industrial sector hardest, depriving it of capital and leadership
and adding a burdensome bureaucracy.72
These effects of nationalization can be eradicated by
making the nationalization statutes voided.
By doing that, the investors’ fears from nationalization will be eliminated and they will
be encouraged to back again to Syria, which will result more investments and more revenue for
the government.
V. THE PRESIDENTIAL DECREE 56/1964 AND THE LAW 14/1986 VIOLATE THE
CURRENT CONSTITUTION OF SYRIA
A Statute Is Unconstitutional When It Violates the Constitution. The general misconception
is that any statute passed by legislators bearing the appearance of law constitutes the law of the
land.73
The Syrian constitution is the supreme law of the land, and any statute to be valid, must
not contradict with it. It is impossible for both the Constitution and a law violating it to be valid;
one must prevail74
. The Syrian Constitutional Supreme Court has the authority to declare the
laws unconstitutional when these laws contradict with the constitution.
70
Eustace Davie, “Nationalization is bad for consumers, workers, the poor and democracy”, http://www.moneyweb.co.za/, 30
September 2010
71
A look at Syria’s upper class, the bourgeoisie and the Ba’th, Middle East report, May-June 1991.
72
Id.
73
Unconstitutional Official Acts< http://www.constitution.org/
74
Id.

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Under the Syrian constitution 2012, the judge shall refer a claim to the Syrian constitutional
Supreme Court when a party in a dispute in front of a court claims that a law is unconstitutional
and, when the judge believes that this claim is sensible and is needed to be decided before the
judge gives his final decision about the decision.75
The law of The Constitutional Supreme Court76
provides its duties, one of these is, providing
a decision about the constitutionality of a law for the referred claim from a judge.77
The law of
the constitutional Supreme Court provide also, when a law is decided to be unconstitutional, this
law shall be considered voided from the date of its establishment.78
However, the constitutional
Supreme Court shall have this authority only after when it decides that the referred claim is
sensible and is needed to resolve a dispute.79
The Kabbani case related to the statutes 56/1964 and 15/1986 is still being seen in front of
the Syrian courts.80
The owner of the nationalized factory provided a claim which represent that
the nationalization statues were unconstitutional.
The claim is sensible. The authorities did not compensate the owners of the nationalized
factory by the presidential decree 56/1964 nor the law 15/1986 till the present. On 04/19/1964
the presidential decree number 56 was established. This decree nationalized the properties of the
Arabic Company for Industry “ACI”. This decree mentioned that “All the properties of ACI shall
be nationalized, and the owners shall be compensated with a just compensation within no more
than ten years from the date of the establishment of this decree”.81
The owners were not
75
‫السوري‬ ‫,الدستور‬ the Syrian constitution, section 147, subsection 2, 2012.
76
The law of The Constitutional Supreme Court, 2014.
77
The law of The Constitutional Supreme Court, section 11, subsection c, 2014
78
The law of The Constitutional Supreme Court, section 38, subsection b, 2014
79
The law of The Constitutional Supreme Court, section 39, 2014
80
Kabbani, 3632, Syrian supreme court, 2011
81
Syrian Law, presidential decree number 56, 1964

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compensated till this day82
. “On 7/7/1986 a law number 15 was established which was a
complementary law for the decree number 56/1964, it mentioned that, all properties that used to
be owned by the Arabic company for industries at the date of the 1/1/1960 shall be included with
the nationalized properties by the decree 56/1964.”83
The compensation method for the
nationalized properties in this law shall be done under the decree 56/1964.84
The new law also created obligations on the Syrian government which was to pay a just
compensation for the nationalized properties, while no compensation was paid, this
nationalization has been deformed to unlawful expropriation which contradict with the Syrian
constitution 2012.85
However, the law 15/1986 created an issue about when the compensation
shall be paid. This law was a complementary law for a decree which was established 20 years
earlier. It considered the properties as nationalized since 1964. Even though, the compensation
was not paid till this day.86
The constitution 2012 provides a special protection for the private
properties. It mentioned that, the private properties shall only be
expropriated as follow;
 For the public benefits.
 By a presidential decree.
 A just compensation.87
The law 15/1986 represented a new issue under Syrian constitution 2012 which is whether
nationalization can be done by a law, while the new constitution mentioned that it shall be done
82
Kabbani v. Syrian government, 3632, Syrian supreme court, 2011
83
Syrian law, lawyers magazine, 1986
84
Id.
85
Kabbani, 3632, Syrian supreme court, 2011
86
Id.
87
‫السوري‬ ‫الدستور‬ , Syrian constitution, section 15, 2012

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only by a presidential decree.88
And whether it shall be unconstitutional under the constitution
2012.
The authorities has gained unlawful enrichment when no compensation was paid in exchange
for the nationalized properties, this has deformed the nationalization to an unjust expropriation.
The government has received unjust enrichment when the owners have not been compensated for
the properties that were taken from them because of nationalization, “unjust enrichment is a legal
doctrine stating that if a party receives money or other property through no effort of his own, at
the expense of another, the recipient should return the property to the rightful owner, even if the
property was not obtained illegally.”89
The government has expropriated the factory by the decree number 56/1964 and other
properties owned by the factory by the law 15/1986 without having paid any just
compensation.90
By determining the invalidity of these provisions, the authority shall return the
expropriated properties to the real owners, then the unjust enrichment will not be existed, and the
real owners will be able to regain their ownership rights.
Giving a decision about the legality of the law 14/1986 and the presidential decree 56/1964
will do an essential rule in resolving the conflict which is still presented in Syrian Courts about
the ownership of the nationalized properties.91
The legal basis of the current dispute about the ownership of the nationalized properties is the
statutes 14/1986 and 56/1964. When the Constitutional Supreme Court declare these statutes
unconstitutional, there will be no legal basis for the nationalization which is the subject of the
current conflict, the ownership of the nationalized properties will back to its private owners.92
88
Syrian constitution, section 15, 2012
89
Syrian civil law
90
Kabbani, 3632, Syrian supreme court, 2011
91
Id.
92
Syrian Civil code, section 136, 1949

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VI. Conclusion
The presidential decree number 56/1964 which was the fundamental ground for the law
14/1986 has failed to satisfy its original purpose in implementing the socialism principles in
Syria. The properties that were nationalized by the law 14/1986 should be returned to its’ rightful
owners. The law 14/1986 in unconstitutional because its purpose was to nationalize property by
indirect way, which was a clear violation of the Syrian Constitution 2012 section 15. The
government will save its funds, where these funds can be invested in another purpose.
The constitutional Supreme Court has the power to declare a law unconstitutional and make it
voided by the power that was given to this court by Syrian constitution 2012.